September 25, 2014

Tech industry looks good on paper - but agriculture is the lifeblood of our economy

The N80 outside the Talbot Hotel in Carlow was jammed at 6.45am as hundreds of headlights blurred into one, all going in the same direction. A tailback of trucks, vans, 4×4′s and dozens of Toyota Corrollas snaked its way relentlessly towards Stradbally.

This annual pilgrimage to the “Ploughing” is the Haj for people who have their dinner in the middle of the day. From all over the country, they descend on this three-day celebration of Irish farming, agriculture, food and trade.

Folk who don’t see each other from one end of the year to the next, commune at the Ploughing.

At 8am, it wasn’t looking good.

Evelyn Cusak’s optimism was cursed as dark, heavy, bluish-grey clouds menaced. Her Indian summer promise couldn’t be wrong, could it? It was cold to boot and the whole place could easily turn into a Glastonbury without designer Wellies if the heavens opened.

But they didn’t, thank God. By 10 o’clock, the place was heaving under murky whitish skies, which we all know pose no immediate threat. It could stay that way for hours without a drop. Foreigners might beg to differ, but we Irish know our clouds and these were amateurs. The crowds built and the stalls, selling everything under the natural sun, were thronged.

The Ploughing is Irish agriculture, crucial to the economy, to the fabric of Irish rural society and it is still the biggest indigenous industry in the country.

Despite the problems with beef prices this year, Irish farming has the capacity to grow rapidly. There is real value in land, food and farming. The global demand for food is constant and growing.

After all, if the world population is exploding to 7 billion, someone has to feed these people. Who will provide milk powder to Chinese infants following the scandal of melamine-tainted milk formula that killed at least six babies, leaving the Chinese wary of any Chinese milk products? It will be Ireland – one of the world’s natural milk producers. Already, tiny New Zealand has achieved the remarkable feat of becoming China’s biggest dairy supplier. Why couldn’t we follow suit? The elimination of milk quotas next year will certainly help.

And the change in the Asian diet is not limited to dairy.

It is a well-known economic fact that when less-well-off people get richer, the first thing they change is not their iPads, their smart phones or their cars as you might expect; people on the move upwards change their diet. When they have a few more shillings, people shift to eating more meat.

We are already seeing this in both India and China, where the new middle classes have dropped their traditional diets and are adopting Western red meat to indicate their higher, more Westernised, social status.

There is an enormous global opportunity for efficient Irish farming in a world of growing populations and changing diets. And the figures in Ireland for agriculture bear this out.

For example, despite all the hipster hype about hi-tech, start-ups and Silicon Dock in Dublin, agriculture is still Ireland’s biggest indigenous sector, contributing €24bn to the Irish economy, almost 10pc of all exports and 7.7pc of all employment. (According to Teagasc, this figure rises to 10pc when all agricultural subsections are included.)

Yesterday, US President Barack Obama declared he wants to prevent companies he described as “corporate deserters” using Ireland to avoid paying legitimate US tax. At a time like this, we would not be wise to favour one industry over another, particularly if the ones we favour might be the target of the US government’s wrath.

Logic suggests that national industries with real value added are precious because retaining every single euro invested is precious.

It is essential that investment doesn’t “leak” out of the country as soon as it is committed. Take some of the multinationals which Obama mentioned: many are using Ireland purely as a tax haven, so money is leaking out of the country in fictitious profit figures driven exclusively by tax shenanigans. Even when this mightn’t be the case, most multinationals import much of their materials, assemble the product in Ireland and re-export it straight away. This looks great in terms of Ireland’s export figures, but how much money actually stays in the country? Where is the true value added?

Farming is different because most of the materials are local: the workers, the land, the crops, the fertilizer and the animals. As a result, according to a recent UCD study, every €1 investment into Irish agriculture leads to a €4 return in the economy.

We can see this by the gap between farming output, which is just above €4bn and agricultural and food output, which is €24bn. This implies a massive €20bn in value is added from farm to export market.

This economic ratio, which measures how much €1 circulates in the local economy, is called the multiplier. It explains how each euro spent can be amplified. For example, I buy from you, you employ my friend and pay his wages, he buys something with his wages from me and I employ someone else who, with new wages, buys from you. In economics, your spending is my income and my spending is your income.

The more local the trading, the more this applies and this is what the Ploughing is all about.

Agriculture and food is local. Raw materials are local. Employment is local and sales are local. Over 70pc of farming raw materials are locally sourced, as opposed to just 44pc for domestic manufacturing companies and much less for multinationals.

If our farming industry is going well, the money changes hands with the local economy and everyone benefits.

The change in the diets of the Indian and Chinese populations to eating more dairy and meat is not a good thing. To look at it purely from an Irish economic perspective is to ignore the environmental impact of those industries. Put simply it is very inefficient to use farmland for grazing cattle instead of growing crops. With an increasing global population we need to be more efficient at providing food and the beef industry is about the least efficient and most resource intensive option out there.

Too true.
The US has only 3 million farmers.
In comparison, Romania has 3.5 million farmers.
The US produces enough grain to feed 2 billion people – but does not export a single grain.
Why? Because it uses most of that as feed for livestock.
What consequences for the planet and all of us in it if/when Asia gets an American taste for meat?

Since these wars Chinese diet has remained in the doldrums and it took Hollywood to change all that .Until the arrival of Hugh Gogh ( Limerick man ) the second most important army Lt of Queen Victory after Duke of Wellington , the diet of Chinese was better and these wars changed all that .Hong Kong was the last bastion of the Empire and a statue of Hugh Gogh can be seen there .The Estate where he was raised is near the University of Limerick.

Isn’t it funny then, that Irish farmers tell their sons and daughters to go to university (with a grant in their schoolbag) to get a degree in science / engineering / business / arts?

Where are the innovative farming wealth creators? What’s Tom Parlon doing to improve the sector? Oh sorry, wait, he took a plumb job in the construction federation industry HQ at €300,000 per annum for his leadership skills. Good man Tom.

If you’re looking for agricultural innovation maybe Holland is worth emulating. The Netherlands generated 79 billion Euros in agricultural exports in 2013 second only to the US. That’s over three times the level of Ireland in a Country that has a constant battle with the North Sea and has one of the highest population densities in Europe. Three times the value with less natural resources available. What does the leader of the Dutch farmers association get paid and is it time to headhunt him/her?

It looks that Irish Farming will have to lessen the amount of beef production over time and focus on more eco friendly alternatives. Then again as the production of stem cell burgers become more viable there may well be less demand for grass produced beef.

Ireland has twenty percent of the EU fishery waters and I think its about time that we look to renegotiating the short-sighted deal that was done when we entered the EU.

This industry, from what I read, could be providing in the region of 300,000+ sustainable jobs in Ireland. Surely this is an objective we should be looking at rather than facilitating the huge multi national tax avoiders that soon may well have to make a decision as to what country they are headquartered in and pay for their upkeep instead of freeloading.

To get a good overview of whats happening in Ireland’s fishing industry its well worth reading Harry Browne’s article in the Dublin Review, ‘Where will they get the fish?’http://thedublinreview.com/fish/

Too many people are imposing their ideological opinions on economic facts here. Why would Irish farming lessen it’s beef production when that is the very kind of production which will be in demand in China and Asia as they get richer? Yes there are climate issues, mostly related to methane production, which shouldn’t be impossible to solve. Ireland’s fishing industry could be healthier, but it is not either or.

Serious Farming in Ireland is designed to sell commodities only because there are Quangos lurking deep in the grass of Irish Farming Politics .’A cut’ must be paid before you even get a value added product on the market shelf at home or abroad

Farming in of itself is of course the superstructure to all trade, industry and commerce. Is it not the fact though many farmers sold fine fertile land off for mulit-multi millions in which the ghost estates now sit. Now what does this tell us. Many farmers are not in farming to farm but to get rich. So running a farm becomes merely but an opportunity to swag the system. And so many farmers are concealed pirates.

thank god the annual big boring beatification of the farmer is over and the stupid week long programmes repeating the same inanities of the previous year about de traffic and de wedder and dems very big tractors has ground to a halt. Its been so disappointing this year for journalists without the photo opportunities in de mud but maybe next year we’ll have a de luge or two.
My self employed neighbour who has a few acres doing nothing gets an annual payment of 9k. Why is there no proper decent reporting from this fest with a few hard questions?

As somebody who works in the Tech sector, I can vindicate that official statistics completely over-rate what Irish society gets out of the mnc sector.

Folks, the mncs are here because we are [ societally] cheap. And we have a leadership [ not just political ] that has a very low estimate of societal quality. In fact you seen this clearly in the banking bailout.

MNCs are here because they get to handover the minimum amount of their profits to this location. That is effectively the business model of Ireland Inc.

In comparison to agriculture, tech is easy. And the IFSC gambling centre is even easier. Especially when central bankers are printing money to subsidize the asset markets.

All that remains now is for Ireland’s leaders to leverage what is left of the country’s productive capacity, so as to make themselves look impressive to us, and meanwhile they screw up the country entirely. For a few crumbs “at the heart of Europe”, etc…

The Lands on the Isle of Ireland holds too many resources for those living there .Those living there have no access to the development of all those resources .Those that hold the control to the potential of all those resources have no social agenda .

The resources of the Isle are decreed in history and the ensuing corporate greed and the people are denied their rights in nationhood.

‘Let us remember that we are not seeking economic progress for purely materialistic reasons but because it makes possible relief of hardship and want , the establishment of a better social order , the raising of human dignity, and , eventually , the participation of ALL who are born in Ireland in the benefits , moral and cultural , as well as material , of spending their lives and bringing up their families in Ireland ‘

It seems a long time since I used to post here about Raymond Crotty. A self-taught farmer (before he became a self-taught economist and agricultural adviser in the Third World) he realized after a few years of physically and mentally exhausting intensive cultivation, use of all the latest agricultural science and techniques and employment of (what was it?) more than a dozen local people, that the owner of the farm next door was making just as much profit as him. His neighbour did nothing only let his cattle run wild and then once a year a dealer would arrive and be invited to go and round up himself the animals running wild below in the fields. Crotty twigged that the reason he wasn’t doing very well for all his effort was the high cost of inputs: labour, fertilizer and just about everything else.

Since I have been in Ireland (1987) I remember the following charges being introduced for householders: rubbish collection, NCT, airport tax, credit card tax, property tax and now water. The water charge is imposed by Europe and I’d be confident that that is the reason for the waste charge.

Crotty argued that land should be taxed in order to increase efficiency and output and claimed that alone amoung western Europe (and probably elsewhere) since Independence farm output has stagnated. Cattle is the most land intensive form of agriculture (in the sense that you need more land to produce and equivalent output). He also argued that the independent state was founded expressly to protect the title and interests of landholders, estimating that in the 19th C about ten thousand British landholders were replaced by the holders of capital in stock: about 20,000 native farmers as owners of the land, nearly all of these either rack-rented themselves in their own time or the children of rack-rented tenants who had got lucky. This will explain why one of the earliest significant actions of the Free State Govt. was to cut a shilling off the meagre old-age pension. He also argues that one of the underlying factors behind the push for independence (the catalyst being conscription into WW1) was to avoid Irish landholders having to subsidize the embryonic welfare state which the Liberals had just introduced.

Thanks Wills. I just bought a new copy of Ireland In Crisis which is a kind of condensed history of western civilization. I particularly like the way he explains capitalism from its origins in the western European forests where the conditions required the use and accumulation of capital (stock for draught, winter storage of hay, barns, tools etc) just to survive in a harsh climate. This process was painfully slow over centuries and millennia but from the 15th and 16th centuries the potentially unlimited production built into the system exploded and conquered the world. A Radical’s Response is also excellent and contains a lot of biographical information.